Providers struggle to turn a profit with current cloud pricing model

Grazed from TechTarget. Author: Gina Narcisi.

Flexible, pay-as-you-go cloud pricing models have attracted enterprise customers to cloud services, and providers are struggling to turn a profit. In a recent TechTarget survey of cloud providers, 44.8% of nearly 300 respondents listed profitability of cloud services as their main business challenge. The problem will only worsen as cloud services become commoditized, said Tom Nolle, president of CIMI Corp., a consultancy in Voorhees, N.J.

The upfront costs associated with building data centers, coupled with unrealistic buyer expectations and competitive cloud pricing, can set cloud providers up for failure. Cloud providers can find profits by differentiation through value-added services and with a little help from larger cloud players or colocation…

The cloud pricing model: Why are providers struggling?
New cloud providers have large upfront costs. They have to invest in sales and marketing to acquire customers and hold onto them. Telecommunications service providers will lock their customers into a fixed-term contract for network services, but pay-as-you-go cloud pricing models offer service providers limited security, making it difficult to predict revenue, said Lynda Stadtmueller, program director of cloud computing services for San Antonio-based Frost & Sullivan Inc…

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